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/ Residential Tax Credits
With the signing of
the Alternative Energy Bill of 2005, new opportunities were opened
for millions of Americans to lessen their dependency on traditional
supplies of fossil fuels and electricity.
Never before has it been so affordable to make the investment in
energy conservation and production for one's own home or business.
Below is a breakout of the Federal tax credits (note: these are
true "Credits" against tax liability, rather than just
a "deduction" which just lowered the amount of income
that could be taxed.)
| Incentive Type: |
Corporate Tax Credit |
| Eligible Renewable/Other Technologies: |
Solar Water Heat, Solar Space Heat,
Solar Thermal Electric, Solar Thermal Process Heat,
Photovoltaics, Geothermal Electric, Fuel Cells,
Solar Hybrid Lighting, Direct Use Geothermal, Microturbines
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| Applicable Sectors: |
Commercial, Industrial |
| Amount: |
Currently 10% for geothermal
electric and solar; from January 1, 2006 until December
31, 2007, the credit is 30% for solar, solar hybrid
lighting, and fuel cells, and 10% for microturbines.
The geothermal credit remains at 10%. |
| Maximum Incentive: |
$550 per 0.5 kW for fuel
cells; $200/kW for microturbines; no maximum specified
for other technologies |
| Eligible System Size: |
Microturbines less than
2 MW; fuel cells at least 0.5 kW |
| Authority 1: |
26 USC § 48 |
| Authority 2: |
Energy Policy Act of
2005 (Section 1336 - 1337) |
| Date Enacted: |
8/8/2005 |
| Effective Date: |
1/1/2006 |
| Expiration Date: |
12/31/2007 |
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Summary:
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A 10% federal energy tax
credit is currently available to businesses that invest
in or purchase solar or geothermal energy property
in the United States. The Energy Policy Act of 2005
(H.R.
6) expands the credit to fuel cells and microturbines
installed in 2006 and 2007 and to hybrid solar lighting
systems installed on or after January 1, 2006.
For eligible equipment installed from January 1, 2006
through 2007, the credit is set at 30% of expenditures
for solar technologies, fuel cells, and solar hybrid
lighting; microturbines are eligible for a 10% credit
during this two-year period. For equipment installed
on or after January 1, 2008, the tax credit for solar
energy property and solar hybrid lighting reverts
to 10% and expires for fuel cells and microturbines.
The geothermal credit remains unchanged -- at 10%.
The credit for fuel cells is capped at $550 per 0.5
kW of capacity. The maximum microturbine credit is
$200 per kW of capacity. No maximum is specified for
the other technologies.
Solar energy property includes equipment that uses
solar energy to generate electricity, to heat or cool
(or provide hot water for use in) a structure, or
to provide solar process heat. Hybrid solar lighting
systems are those that use solar energy to illuminate
the inside of a structure using fiber-optic distributed
sunlight. Geothermal energy property includes equipment
used to produce, distribute, or use energy derived
from a geothermal deposit. It does NOT include geothermal
heat pumps. For electricity produced by geothermal
power, equipment qualifies only up to, but not including,
the electrical transmission stage. Energy property
does not include public utility property, passive
solar systems, pool heating, or equipment used to
generate steam for industrial or commercial processes.
To qualify, the original use of the equipment must
begin with the taxpayer or it must be constructed
by the taxpayer. The equipment must also meet any
performance and quality standards in effect at the
time the equipment is acquired. The energy property
must be operational in the year in which the credit
is first taken.
If the project is financed in whole or in part by
subsidized energy financing or by tax-exempt private
activity bonds, the basis on which the credit is calculated
must be reduced. (The formula is described in the
tax credit instructions.) Subsidized energy financing
means "financing provided under a federal, state,
or local program, a principal purpose of which is
to provide subsidized financing for projects designed
to conserve or produce energy." Therefore, a business
must reduce the basis for calculating the credit by
the amount of any such incentives received.
Taxpayers can not claim both this business energy
tax credit and the credit allowed under 26 USC §45
(Renewable
Energy Production Tax Credit) for the taxable
year or any prior taxable year. |
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Residential Tax Credits
Solar Photovoltaic and Hot Water Systems
The new provision also offers tax credits to individuals for residential
solar energy systems.
For solar hot water systems, the allowable tax credit is 30% of
the qualified solar system expenditures up to a maximum tax credit
limitation of $2,000.
For solar photovoltaic (PV) systems, the allowable tax credit is
30% of the qualified PV system expenditures up to a maximum tax
credit limitation of $2,000.
To be eligible for the solar hot water system tax credit, the system
must be certified by the Solar Rating and Certification Corporation
(SRCC) and produce 50% or more of the hot water needed by the residence.
There is no qualification provided for PV systems. Individuals may
claim tax credits for either or both types of solar systems.
The incentives apply to equipment placed in service during 2006-2008.
There are new Massachusetts Tax Credits for 2006. The tax credit
is 15% for residential systems with a maximum $1000.00 credit. Click
for a pdf file with the MA
Schedule EC Form.
There are also Federal Tax Credits of 30% for residential systems
with a maximum $2000.00 credit. Click for a
pdf file to download IRS
Residential Energy Credits Form 5695.
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